How does this impact house prices?
Homebuyer enquiries, sales, and new instructions all fell in August compared with the previous month, according to the Royal Institution of Chartered Surveyors (RICS).
The results of its latest residential market survey have shown that new buyer enquiries dropped at the steepest rate since the early stages of the pandemic, with 39% more of the survey respondents reporting a fall rather than a rise, down from minus 26% previously. It was also the fourth consecutive month of negative readings.
Sales also went down for the fifth consecutive month, with a net balance of -22% during the period, lower than the -13% in July. RICS said the latest feedback implies that this downward trend is becoming further entrenched.
Sales predictions for the three months ahead also slipped further into negative territory, while expectations for 12 months ahead are the most downbeat they have been since the series began in 2012.
Average stock levels on estate agents’ books plunged to an all-time low of 34 homes per branch. This lack of supply, RICS noted, has been a crucial factor in underpinning growth in house prices.
Read more: Halifax reveals the latest on UK house prices.
A net balance of 53% reported an increase in house prices in August, down from 62% in July, but still way above the long-term average of 13%. However, 12-month price expectations have declined, from a net balance of 78% back in February to just 3% in the latest results.
Tarrant Parsons, senior economist at RICS, said concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture.
“Given projections for the UK economy point to a potential recession emerging towards the end of 2022, respondents envisage housing sales continuing to slip in the coming months,” Parsons noted. “For the time being at least, the lack of stock available on the market is still providing support to house prices, which continue to rise, even if the pace of growth has cooled over recent months.”
Tomer Aboody, director of property lender MT Finance, agreed that the simple economic equation of supply and demand is maintaining steep house prices, adding that ready buyers are still looking to make a move and take advantage before interest rates rise even higher.
“With so much uncertainty set to come over the next 12 to 24 months, the market will start to stabilise but whether there is a crash remains to be seen,” he said. “There would need to be high sales volumes at lower prices for that to happen but with inflation rising there will be worried homeowners who bought in the past few years. Let’s hope Liz Truss’s appointment results in some quick assistance to manage the pain.”
For Jeremy Leaf, north London estate agent and former RICS residential chairman, it is becoming increasingly clear that the shortage of stock not only continues to support prices, but also disguises the impact of the rising cost-of-living on the rest of the market.
“Another problem is that demand can disappear if not satisfied fairly quickly so prices may soften further,” Leaf remarked. “Nevertheless, we’re not seeing widespread renegotiations or buyer withdrawals so don’t expect a significant correction yet, although the market is certainly more price sensitive than a few months ago.”